Study shows environmental regulation may have helped small hog farms endure

Hog farms have become fewer and larger in recent decades, even as federal and state environmental regulations governing them have become stricter.

Agricultural economists Azzeddine Azzam and Karina Schoengold examined how environmental regulation has shaped the industry in the top 10 hog-producing states. Their conclusion: Environmental regulation has slowed the growth of large confinement operations and actually helped keep more small farmers in business than otherwise would have survived.
Livestock feeding operations have been subject to environmental regulations since 1976. Federal regulations, enacted under the Clean Water Act, require large confinement operations and some medium-sized ones that discharge pollutants to obtain a permit and to develop a plan for manure storage and disposal.
Many states have adopted additional regulations stricter than those imposed by the Environmental Protection Agency. They include zoning restrictions to limit where hog confinement facilities can be built; larger buffer zones from nearby residences; construction and operating permits and odor control requirements. Farms with fewer than 2,500 hogs are exempt from state and federal regulation.
Because small farms did not have the expense of complying with environmental regulations, they benefited from prices pushed upward because of the smaller supply produced by regulated large confinement operations, the UNL study showed.
It further found that between 1995 and 2005, the actual inventory of small hog farms declined by 61 percent, the actual inventory of large hog farms increased by 95 percent, and the actual total hog inventory of all farms combined increased by 9 percent.
Absent environmental regulation, the inventory of small hog farms would have declined by 69 percent, the inventory of large farms would have increased by 121 percent and the inventory of all farms combined would have increased by 17 percent, the researchers note.
However, the impact of environmental regulations on large confinement operations depends on the nature of the rules, Azzam said. Some rules can encourage growth while others inhibit it; for example, if a farmer is required to incur a large fixed cost such as an expensive manure treatment system, it might be profitable to increase the number of hogs in the operation. But if the rules require a increase in operating expenses, such as requiring manure used as fertilizer to be spread more thinly, it might be more cost-effective to reduce the number of hogs.
“Industry shifts to greater total inventory in large farms have been in spite of, not because of, increasing environmental stringency,” Azzam and his colleagues, which also included Gibson Nene of the University of Minnesota-Duluth, concluded in their article. It was published recently in the Canadian Journal of Agricultural Economics.
“For regulators who are concerned about both environmental quality and the protection of small family farms, environmental regulation does not seem to adversely affect the viability of such operations,” the authors wrote.
-- Leslie Reed | University Communications